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# workshop 2 - apart It is a hot day and all the bathers want...

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ECOS2201 - Economics of Competition and Strategy Workshop - 2 1. Why are outlets for McDonalds, Subway, and Kentucky Fried Chicken often located next to each other. Discuss 2. Consumers are distributed along main street one metre apart, they each buy one unit of the product we are concerned with. Transportation costs per-metre are t = 1. Two firms, A and B, are located on main street. They produce the product at zero cost. If it costs F = 10000 for a new firm to create a store on Main Street, (i) how far apart must A and B locate so that entry by the new firm is not profitable. (ii) if A and B locate so that entry is deterred, what price does each firm charge and how much profit does each firm make. Is this profit greater than the fixed cost of entry. Discuss. 3. The price of ice-creams is regulated by government and is fixed at \$4 per-ice- cream. Don and Andrew have the rights to sell ice-creams at Coogee beach. The beach is 400 metres long. There are 400 bathers at the beach, each located 1 metre
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Unformatted text preview: apart. It is a hot day and all the bathers want to but one ice-cream. For each bather the cost of getting up oﬀ their towel and travelling m metres to an ice-cream stall is m cents (1 cent per-metre). Don and Andrew buy identical ice-creams from the same supplier at a price of \$1. At what points on the beach will Don and Andrew locate there ice-cream stalls. How much proﬁt do Don and Andrew make. 4. The situation on Coogee beach is as described in question 3 above except the price of ice-creams is not regulated. Don and Andrew are free to choose where they locate on the beach and the price at which they sell their ice-creams. (a) If they located next to each other in the middle of the beach, what price would they charge and how much proﬁt would they make? (b) If Don located at one end of the beach and Andrew located at the other end of the beach, what price would they charge and how much proﬁt would they make. 1...
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